Understandably, people are more wary than usual about where to invest this year. As you review your portfolio, think about how 2012 might be different from 2011 and ways it could bring more of the same. It pays to keep in mind one of esteemed former Wall Street analyst Bob Farrell’s cardinal rules of investing: “When all the experts and forecasts agree — something else is going to happen.” Read more: 10 investing rules tailor-made for tough markets.

Most of the picks MarketWatch made in December 2010, based on recommendations and research from investment professionals, beat the Standard & Poor’s 500 Index
SPX, -0.23%
— though that’s not saying much about a year when the U.S. benchmark was flat on a price basis and up 2.1% with dividends reinvested.

The best advice was to run with the “Dogs of the Dow.” This strategy of buying the 10 highest-yielding stocks in the Dow Jones Industrial Average
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and holding for 12 months rewarded investors with stellar gains, up 17% for the year including reinvested dividends.

Adding consumer-staples stocks to consumer-discretionary stocks was another winner, with the staples sector gaining 10.5% and discretionary shares up 4.4%. Energy and technology sectors also outperformed the market, as did growth stocks.

The biggest losers: Materials-sector stocks, down almost 12%. Emerging-markets infrastructure plays and industrial-sector stocks also lost ground.

Nowadays investors’ mood is mixed at best. Mutual-fund shareholders have piled into bonds and fled U.S. stocks for several years; surveys of investment advisers show cautiousness about buying stocks, and hedge-fund managers appear increasingly bullish. Bond investors, meanwhile, have to question when this epic bull market will end.

Looking ahead, investors should tune out the noise, turn on the head lamps, and consider these 10 ways to position your portfolio in 2012:

1. Stick with 2011’s winners

Buy what’s worked and head for the beach? Not quite. But many of the headwinds investors fought in 2011 haven’t disappeared and could worsen, which means that some of last year’s winners could repeat.

Geopolitical and economic risks will, as always, impact financial markets and consumer prices short-term, with accompanying high volatility. Yet broadly speaking, in the current anemic global climate, where economic growth is increasingly scarce, pressure on interest rates and inflation isn’t much of an immediate threat.

U.S. stocks trounced their international counterparts, and look to do so again in 2012. Large-caps outperformed small- and midcaps, and growth-stock investors bested more bargain-minded value buyers. Expect more of that as well.

The hunt for yield remains a priority. The Dogs of the Dow perform in volatile, tug-of-war markets and seem poised for another round. The 2012 Dogs are unchanged from 2011 except Procter & Gamble Co.
PG, -0.89%
has replaced McDonald’s Corp.
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AT&T Inc.
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is again the highest-yielding Dow component.

Bull markets, past and present: Is the rally over?

(3:13)

MarketWatch columnist Mark Hulbert notes that the U.S. bull market has run much longer than others in history — and that might suggest it's run its course. Interview with Laura Mandaro. Photo: Getty Images.

In a slow-growth world where developed nations are deleveraging — much of Europe is likely to be mired in recession this year and the U.S. will be lucky if growth nears 2% — expect bond yields to remain low.

The riskiest play is long-term Treasurys. If the 30-year Treasury yield slides to 2% or 2.5% — perhaps in a euro-sparked panic — that probably would be the last gasp of the Treasury bond bull. Still, investors would win big on a total return basis, though not as much as in 2011.

2. Own defensive stocks in a deleveraging age

Focus on capital preservation and the preservation of cash flow.

From a stock perspective, the classic defensive sectors include yield-rich consumer staples, health care and utilities.

Among these three, only the consumer-staples sector gets an enthusiastic nod from analysts at S&P Capital IQ. Utilities, especially shares of electric companies, enjoyed a tremendous run in 2011, up 14.5%. And while these companies offer hefty dividends, valuations have increased considerably and the S&P analysts expect market performance from the group in 2012. The analysts are also neutral about the health-care sector, which gained 10.2% last year.

3. Add some economic sensitivity

“A balanced sector approach that emphasizes both cyclical and defensive themes is critical to navigating this manic market,” said Alec Young, global equity strategist at S&P Capital IQ, in a recent research report.

That means you have to temper the urge for flight and beef up the portfolio with some fight. Put some money into cyclical sectors that lagged in 2011, including materials, industrials, energy and technology.

4. Stick with dividend-paying growth stocks

U.S. corporate balance sheets — the fundamentals — are in excellent shape overall. Still, in a slow-growth climate the advantage goes to the best of the best. These companies tend to be in areas that are less economically sensitive. Typically they’re large-caps, with a “wide moat” of business, strong cash flow and a history of using capital for productive purposes including acquisitions, share buybacks and consistently higher dividends.

“Gravitate more to the income-oriented sectors of the U.S. market for the time being,” said David Rosenberg, chief economist and strategist at Toronto-based investment manager Gluskin Sheff + Associates, in a recent research report.

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